Assume that an economy can be represented by the following per worker output function: y-AKa where...

 

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Assume that an economy can be represented by the following per worker output function: y-AKa where a-1/3 and 4-5. The depreciation rate for capital is given by 8-10% and the investment rate is given by y=20%. Suppose that at period t, the capital stock per capita is kt=10. Compare the income per worker at period t with the long run, steady state equilibrium income per worker as predicted by the Solow model. Show your calculations. Describe your results above with a graph with k in the horizontal axis. Suppose instead that at period t, the capital stock per worker is kt=20. Recalculate and compare the income per worker at period t with the long run, steady state equilibrium income per worker as predicted by the Solow model. Show your calculations. Assume that an economy can be represented by the following per worker output function: y-AKa where a-1/3 and 4-5. The depreciation rate for capital is given by 8-10% and the investment rate is given by y=20%. Suppose that at period t, the capital stock per capita is kt=10. Compare the income per worker at period t with the long run, steady state equilibrium income per worker as predicted by the Solow model. Show your calculations. Describe your results above with a graph with k in the horizontal axis. Suppose instead that at period t, the capital stock per worker is kt=20. Recalculate and compare the income per worker at period t with the long run, steady state equilibrium income per worker as predicted by the Solow model. Show your calculations.

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Ans 1 x y AK A 5 5k y when Kt 10 510 5 1 Ye 1077 4 income per worker at period t Now si... View the full answer